The Gold Coast’s other casino

As I have mentioned previously, the Gold Coast is the frontline of the credit driven correction occurring in Australia. I have previously expressed my concern about the flow-on effects to Queensland’s banks.  Today I note that the local spruikers are back trying to talk up the market.

FOUR of 11 prestige properties were sold in an exclusive auction held by Ray White Surfers Paradise at Palazzo Versace last night.

The auction — part of RWSP’s three-day ‘Event’ — was well attended on the night and other properties are set to go over the line within days.

There were several bidders on about half the properties and the auction started well when the first lot was settled.

The luxury property at 34 Admiralty Drive, Paradise Waters, went for $4.8 million.

Some of the highly publicised properties — including an island on the Isle of Capri and a beach house at Vogue on Broadbeach — did not sell.

Ray White Surfers Paradise Group CEO Andrew Bell, who was pleased with the auction results, said he was confident the other properties ‘would settle within the week’.

”They’re really exciting properties,” he said.

Mr Bell said the prestige auction results and the sales from the morning’s Alfresco auction in Main Beach were proof the Gold Coast market had turned the corner.

I am not sure a 36% clearance rate seems that positive, but the one house they did mention seems like it got a big price.  That is until you bother to check the sales history of the house at 34 Admiralty Drive, Paradise Waters only to find that it last sold for $5.8 million in July 2005.  A $1 million loss over 5 1/2 years. Is it possible to turn a corner in the downwards direction ? 

But not to be put off by facts,  another “expert” at the same event  claims we had all better jump on board before it is too late.

BUYERS looking for new Gold Coast high-rise apartments should move now or risk being shut out of the market over the next five years, according to Gold Coast real estate agent Andrew Bell.

In his annual market analysis today at Ray White Surfers Paradise Group’s  The Event 2011 auctions, Mr Bell highlighted that there would be few high rises built in coming years,  causing in a shortage of supply and positive price growth.

Mr Bell said new apartment stock levels had reached their lowest levels since 2003 and fewer developments were set to get off the ground.

Only three high-rise apartment projects are due for construction completion on the Gold Coast – Soul, Hilton in Surfers Paradise and H20 at Southport.

“New stock entering the market is non-existent,” said Mr Bell.

It is little wonder that there isn’t going to be any new stock for a while. Let’s remind ourselves what happened to the latest complex that was completed on the Gold Coast. 

ONE of Australia’s largest apartment tower projects, the $850 million Oracle Broadbeach complex on the Gold Coast, is in receivership. The 505-apartment complex at Broadbeach was being developed by Niecon subsidiary South Sky Investments.

 South Sky Investment director Michael Nikiforides placed the company into receivership.

It is the second Niecon-related business to fail.

This month the Nirvana by the Sea residential Gold Coast project was also handed over to its financier.

It is understood that the completed Oracle project collapsed because of problems with settlements of up to 400 apartments within the towers that had been pre-sold before the global financial crisis.

After the crisis hit, many were unable to come up with the cash.

The apartments had been in the process of settling since October, sources said.

This mess is far from over, and in my opinion the finance fallout has only just begun. But if you think I have got it wrong and the spruikers have got it right then you may also want to consider another one of the Gold Coast’s “investment” offerings.

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Comments

  1. These spruikers need to cheer up the following developers

    http://www.goldcoast.com.au/article/2011/01/01/279731_gold-coast-business.html

    “AMALGAMATED Property Group has put a Broadbeach development on ice amid the fallout from the receivership of Niecon’s Oracle project.

    The $90 million Broadbeach Central tower was to be launched next month, but APG said its sixth Gold Coast project in the past six years would have to wait until uncertainty in the market had settled.

    “We would prefer to wait and see what action the receivers take prior to finalising our launch date,”APG boss Barry Morris said.

    “We see no benefit in launching Broadbeach Central until the receivers’ direction is known.” The 20-level Broadbeach Central was expected to have the only supply of new developer stock in Broadbeach priced from $439,000, making apartments among the cheapest in the beachfront suburb at about $5000 a square metre.

    The decision will not affect APG’s construction of its upmarket Eclipse tower, which has apartments from about $1 million each.”

    I like that final paragraph – OK, we’ve got an oversupply situation (afterall, they have failed to sell up to 80% of properties in the Niecon development), so we’re going to sit on already constructed apartments in the hopes of outlasting the downturn – but, not to be deterred, we’re still going to pump out more apartments…. so perhaps they have already had a chat with the developers 😉

    • H4A, yes they’ll sit on overpriced units and townhouses until “market conditions improve”, with no idea when that will be. Developers develop. They may slow down but if they’re not developing properties then they’re not… well they’re not developers are they?

      Out my way there’s a seven month old townhouse complex with only THREE occupied townhouses! Priced at $370K with no pool, tennis court or private park the developers they know they’re dreaming asking that price in this market, so they’ve taken them off the market and are waiting. Hopefully the local bogan kids won’t catch on and jump the fences and cover the little ghost town with graffiti. Meanwhile just up the road the same developers are negotiating with the owners of several large blocks so that they can build yet another complex!

      Of course if the market doesn’t improve in time they’re screwed and that’s when they demand a government bailout for the “common good”. Worthless socialists.

      • Yep, spot on – otherwise they are just “property bankers” like the Chinese who own those ghost towns…

        But the interesting thing is that in Queensland where we have these two major minor 😉 banks… I suspect that the reason why Brisbane moved into rental oversupply through the GFC is that these “major minors” did not have the balance sheet capacity to carry developers while they held their inventory… so they forced developers to sell down inventory and the effect of that was seen in heavy discounting in holiday areas and in the surging vacancy rates in Brisbane… unlike in other markets dominated by the “major majors” who had the capacity to let the developers sit on their inventory – so that their own execs could then run around the world telling investors that our bubble won’t burst while supply is limited….

        I think it is pretty clear in the article that DE supplies below that we are into the end game here in south east Queensland… these developments commencing now are probably going to be the ones that sit unfinished for years… reminds me of my first visit to Bangkok in the late 90s after the Asian financial crisis….

        • Yep, and that’s what pisses me off about the banks working under an implied government guarantee. I remember lecture 1 of Economics 1. We covered the basics of supply and demand curves, defining market equilibrium, and clearance sales being used to clear excess stock so that the market can return to equilibrium.

          But the bank guarantee means banks aren’t as quick to call the developers, so the developers aren’t as quick to clear their stock. Supply remains unresponsive because of witheld stock and it’s the very taxpayers who want a fair go at owning a home who are forced to help support this nonsense. Sounds a lot more like socialism than capitalism to me.

          Residential real estate is the sacred cow if the Australian economy. The masses could be hungry but nobody would kill it for food. Instead they keep feeding the damn thing at their own expense. It can sit there in the middle of a main road leaving massive stinky shits everywhere but nobody will dare move it, no matter how much it impacts the ability of society and the economy to operate.

          Personally, I like steak!

  2. Is this illegal finnacial advising practice – “BUYERS looking for new Gold Coast high-rise apartments should move now or risk being shut out of the market over the next five years, according to Gold Coast real estate agent Andrew Bell.”

    • Interesting quote from that article…

      “Even before the floods there were concerns that the values of at least 30 per cent of Gold Coast properties were lower than that of their mortgages”

    • Hell, there’s lots of interesting quotes in that…. the same paragraph concludes…

      “Put all that together and you have to wonder whether banks are providing full disclosure of “Gold Coast to Noosa” properties, especially holiday homes.”

      And then towards the end supports this view with….

      “Then on Friday it [BOQ] published the prudential disclosure report for November 30, the APS 330, which, Le Mesurier says, shows that not only has the asset quality of its commercial loan exposures deteriorated but so has its residential loans.”

      And a nice concluding statement:

      “If Suncorp and the Bank of Queensland decide to join forces it may be a marriage made in heaven or possibly hell.”

  3. The irony about agents wanting people to take their properties off the market, is that it is not necessarily going to help the market price – for the market price will simply depend on the nature of what properties are LEFT ON THE MARKET.

    Hence, if we start at a point in time with both “really need to sell” and “not so badly need to sell” and tell them all to take their properties off the market, who will listen?

    Easy: Mostly the “not so badly need to sell” crowd.

    Hence, the market’s character shifts, and the actual proportion of properties left on the market now comprises a greater proportion/character of those who “really need to sell”; except, now, they’re competing against a greater proportion of desperate owners.

    It’s a price disaster, waiting to happen, that technique!

    It’s about the nature of properties/owners left ON the market that counts, not the ones that aren’t even there! For, musn’t a property be on the market to participate in the market?

    Makes sense, really.

    Stewart

    • Spot on. That’s always been my argument, but the bulls typically point to ‘fundamentals’ about housing shortages etc., ignoring the fact that house prices are determined only by what’s actually on the market.

  4. Do us all a favour and get rid of Stewarts post at 8:30 am Januray 21.

    We really don’t want real estate agents seeing that type of thing do we?